San Diego Marijuana Businesses Worried About Possible Trump Crackdown

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WWR Article Summary (tl;dr)With the potential that the new Trump administration could reverse years of expansion, many marijuana entrepreneurs are in "wait-and-see" mode.

The San Diego Union-Tribune

San Diego's marijuana industry is bracing for a potential crackdown by the Trump administration that could roll back years of steady expansion and prevent the city's medical dispensaries from adding recreational sales next year.

The crackdown fears are fueled by recent comments from administration officials that enforcement of the federal marijuana ban could resume nearly five years after the Obama administration stopped interfering with states that have legalized the drug.

While dispensaries and pot farms in the city aren't shutting down or abandoning expansion plans, they are anxiously waiting to see how aggressive any revived federal enforcement might be and what form it could take.

Previous crackdowns have included raids on dispensaries in 2011 and 2012, prosecution of individual business owners and attempts to freeze or seize the assets of business owners and their landlords.

Such efforts have been based on the federal government's continued classification of marijuana as a "Schedule I" drug, making it as illegal as heroin and cocaine.

A coalition of legal dispensaries in San Diego, the only city in the region to allow marijuana sales, said any type of federal crackdown would be a mistake.

"The local cannabis industry is obviously deeply concerned about the statements coming out of the White House indicating plans to reverse years of cautious progress on both medicinal cannabis legalization and recreational decriminalization," the group, the United Medical Marijuana Coalition, said in a statement.

"We are watching it closely, recognizing that policy changes could be swift and harmful not just to our future business prospects, but also to our patients and their ability to treat their illnesses."

Opponents of legalization said they would welcome a crackdown.

"This Trump administration has said many times we've got to follow the law and enforce federal laws," said Scott Chipman, leader of the anti-legalization group San Diegans for Safe Neighborhoods. "We're not expecting them to come in and start arresting people standing on the boardwalk smoking a joint. But we are encouraging them to go after the commercial operations -- the grow sites, the commercial sales, the edible producers and the landlords who are knowingly renting their properties to drug dealers."

The federal threats come just as the San Diego industry was gaining momentum from the approval of recreational pot by state voters in November, and the San Diego City Council's decision last month to consider allowing cultivation and manufacturing of the drug within the city limits.

The council also agreed to allow the sale of recreational marijuana at 15 dispensaries approved by the city to sell medical marijuana -- once the state finalizes legalization rules later this year.

While fear of a crackdown hasn't yet prompted dramatic shifts in strategy by local marijuana entrepreneurs, it has made it harder to find enthusiastic investors needed for some ventures.

"Clients have reported to me that before the election a lot of people were excited about investing money and getting into this," said Jessica McElfresh, an attorney representing several San Diego dispensaries. "Since then, the money and conversations have dampened -- haven't gone completely away, but dampened."

McElfresh said the threats have also likely discouraged new people from entering the industry.

"I'm sure for some people who were thinking about getting involved in this, it has had a chilling effect on them proceeding down that road," she said.

McElfresh said conflicting statements from administration officials and President Donald Trump have created confusion, but also some reasons for hope.

Trump said on the campaign trail that he'd respect state laws that permit recreational pot, but Attorney General Jeff Sessions said last month to expect more enforcement, and White House spokesman Sean Spicer said recreational pot would be more vulnerable than medical marijuana.

"It's been tough to read where they're going," McElfresh said.

Congress has drawn a distinction between medical and recreational since 2014, when it approved a budget amendment prohibiting the Justice Department from using any resources to pursue medical marijuana businesses. And that change has since been upheld by the U.S. Ninth Circuit Court of Appeal.

That move dovetailed with a 2013 Justice Department memo that said the Obama administration would leave marijuana businesses alone in states where voters had legalized the drug and there weren't problems with usage by minors or drug cartels.

McElfresh said she expected Sessions to revise that memo, possibly in significant ways.

"I expect them, at a minimum, to tweak the priorities," she said.

If they opt for enforcement, she said it's unclear what that would look like.

"We don't know what form enforcement would take," McElfresh said. "That's another moving part in all of this."
She said the federal crackdown five years ago didn't go well.

"I don't think a lot of people involved in the 2011/2012 crackdown look back and think 'that was a really great idea,'" she said, noting that people went to jail, lost their jobs and had their assets frozen. "The crackdown was devastating and inflicted massive pain on people."

But Chipman, the legalization opponent, said the Justice Department could get results with less aggressive action. He said they could send letters to landlords warning them and then crack down on a few.

"A letter like that and actions on maybe one or two pieces of property would certainly send a shock wave through the entire industry," Chipman said.

McElfresh said strong support across the nation for legalization would make such an approach risky for Trump, possibly prompting a backlash.

The industry has also become more profitable in recent years, increasing its lobbying leverage.

Some have suggested an attempt to recriminalize the drug could backfire, prompting long sought action by Congress to remove it from the list of Schedule I drugs.

The local dispensary coalition said such a backlash is likely.

"We would hope the administration considers that voters have approved medical marijuana in over half of the U.S. states, and to allow recreational in eight states plus the District of Columbia," the group said. "They are very clearly swimming against the tide of public sentiment in America, and are courting blowback at the ballot box."

Gina Austin, another local marijuana attorney, said people in the industry have become accustomed to flux.

"When you look at how much has changed in the last four months, you can imagine how much can change in the next nine months," she said.

She said her clients are ready to shift gears if necessary.

"All my clients are in wait-and-see mode," she said. "We'll continue down our path on medicinal, we'll continue to proceed on entitlements for recreational, and if there's some action taken at the federal level we will adjust our policies accordingly."
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